Fitch gives BBB- to L-3 Communications notes

Fitch Ratings said it assigned a BBB-(EXP) rating to L-3 Communications Corp.’s proposed $550 million of 10-year senior unsecured notes.

The notes will rank equally with the company's existing unsecured notes.

Proceeds will be used to replenish the amount of cash used and the amount of revolving credit borrowings drawn to repay $200 million of senior notes that matured on Nov. 15, 2016, and to prefund the redemption of the $350 million of senior notes due 2017.

Fitch also affirmed the BBB- issuer default rating and debt ratings for L-3 and L-3 Communications Holdings, Inc.

The outlook is stable.

These ratings cover about $3.4 billion of debt after giving effect to the proposed $550 million of senior unsecured notes and the redemption of the $350 million senior unsecured notes due 2017. Similar to the company's other existing senior unsecured notes, the proposed notes will be governed by the indenture dated as of May 21, 2010.

Fitch said the ratings and stable outlook are supported by a diverse portfolio of products and services; good financial flexibility in the form of strong liquidity and substantial free cash flow generation, with a historical net income conversion rate above 110%; stabilizing revenues; improving operating margins; and adequate credit metrics following the retirement of $600 million of aggregate senior unsecured notes in December 2015 and May 2016.

The retirement of these notes addressed elevated leverage due to both topline pressures and significant operating underperformance over the past three to four years, the agency explained.

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